Jurisdiction and Nature of Proceedings in Financial Liquidation and Suspension of Payments

Financial liquidation and suspension of payment proceedings are in rem, which means that it is binding on everyone and not just the parties who participated in the case. Financial liquidation covers both individual and juridical persons, as provided under the Financial Liquidation and Suspension of Payments Rules of Procedure for Insolvent Debtors (2105), also known as the “FLSP Rules”. The FLSP Rules, issued by the Supreme Court pursuant to Section 6 of Republic Act No. 10142, also covers suspension of payments for insolvent individual debtors.

Jurisdiction and Proceedings in Financial Liquidation and Suspension of Payments under FRIA

JURISDICTION: WHERE FILED, HOW ACQUIRED

Under the FLSP Rules, the verified petition must be filed in the proper court. Jurisdiction over persons is acquired in the following manner:

A. The petition for voluntary liquidation of an insolvent juridical debtor must be filed in the Regional Trial Court which has jurisdiction over its principal office as specified in its articles of incorporation or partnership. Where the principal office of the corporation or partnership as registered with the Securities and Exchange Commission (SEC) is in Metro Manila, the petition must be filed in the Regional Trial Court of the city or municipality where the head office is located. [See Voluntary liquidation of Juridical Debtors]

B. The petition for voluntary liquidation of an insolvent individual debtor must be filed in the court having jurisdiction over the province or city where the debtor has resided for 6 months prior to the filing of the petition. 

C. The petition for involuntary liquidation of an insolvent juridical debtor must be filed in the Regional Trial Court which has jurisdiction over the principal office of the debtor as specified in its articles of incorporation or partnership. Where the principal office of the corporation or partnership as registered with the SEC is in Metro Manila, the petition must be filed in the Regional Trial Court of the city or municipality where the head office is located

  • In involuntary liquidation proceedings of juridical debtors, jurisdiction over all persons affected by the proceedings is acquired upon publication of the petition or motion. [See Liquidation of Insolvent Juridical Debtors]

D. The petition for involuntary liquidation of an individual debtor with the court of the province or city where the debtor resides. Note that the debtor need not be residing in the province or city for 6 months prior to the filing of the petition. 

  • In involuntary liquidation proceedings of individual debtors, jurisdiction over the person of the debtor is acquired upon service of summons; whereas jurisdiction over all other persons affected by the proceedings is acquired upon publication of the Liquidation Order. [See Involuntary liquidation of individual debtors]

E. The petition for suspension of payments of individual debtors must be filed in the court having jurisdiction over the province or city where he has resided for 6 months prior to the filing of the petition. 

[See also Introduction to Insolvency in the Philippines: Suspension of Payments, Financial Rehabilitation and Liquidation]

PROHIBITED PLEADINGS

The proceedings shall be summary and non-adversarial in nature. The following pleadings are prohibited: 

For stated and fully supported compelling reasons, the court may allow the filing of motions for extension or postponement, provided, the same shall be verified and under oath.

FORM OF PLEADINGS

Any pleading, motion, or other submission by any interested party shall be supported by verified statements that the affiant has read the submission and its factual allegations are true and correct of his personal knowledge or based on authentic records, and shall contain supporting annexes, which the submitting party shall attest as faithful reproductions of the originals. 

An unverified submission shall be considered as not filed. An improperly verified submission may be considered as not filed, at the discretion of the judge. Upon motion, the court may order that the originals of the annexes to a submission be produced in court for examination or comparison by a party to the proceedings. 

MANNER OF FILING

All pleadings or motions shall be filed simultaneously in 3 printed and 2 digitized copies in compact discs, flash drives, or other compatible Information and Communications Technology (ICT) media, in PDF format. 

ORDERS OF THE COURT

The special commercial court may decide matters on the basis of the pleadings and other documentary evidence, and conduct clarificatory hearings when necessary. 

Any order issued by the court is immediately executory

The provisions of the FLSP Rules are liberally construed to promote a timely, fair, transparent, effective, and efficient liquidation and suspension of payments of debtors, in accordance with the declared policy of the Financial Rehabilitation and Insolvency Act (FRIA) of 2010.

[See also Cross-Border Rehabilitation and Insolvency: Actions of Foreign Creditors and Enforcement Framework of Foreign Proceedings in the Philippines]

P&L Law

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